‘Wait & see’ for opportunity zones

Few governmental programs have generated as much buzz as opportunity zones, a new investment vehicle enshrined in the Tax Cuts and Jobs Act of 2017. The program allows investors to defer taxes on capital gains held within an opportunity fund.

But as Lucas High reports in this edition of BizWest, much uncertainty remains about rules for the program, which is designed to revitalize areas that might have difficulty getting investment otherwise. Funds can be invested in real estate improvements and developments, but it’s unclear what kind of investments can be made in existing businesses — a pretty big unknown among many unknowns.

The Internal Revenue Service has yet to hand down essential rules for how opportunity zones will work, and most investors are waiting on the sidelines until the situation becomes more clear.

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In the Boulder Valley and Northern Colorado, 11 census tracts have received designation as opportunity zones, and some of the areas might be surprising, including a 2.5-square-mile zone in the heart of Boulder.

Wait … did I just say Boulder? None other. This particular zone does include the admittedly stagnant Diagonal Plaza shopping center, which has suffered from recurring vacancies for years. But the Boulder zone also includes the booming Boulder Junction area, the Twenty Ninth Street shopping center and office parks, including one that just sold for a record price.

No offense to developers, but no incentive is necessary for a lot of projects within the confines of Census Tract 122.3, which makes up the Boulder opportunity zone.

Other local communities with opportunity zones include Dacono, Estes Park, Evans, Fort Collins, Greeley, Lafayette, Longmont, Louisville, Loveland and Superior. Some areas are sparsely occupied, while others seem well-developed.

Fort Collins’ two zones include a wide swath of Colorado Highway 14, from Riverside Avenue to Interstate 25. Greeley’s zone includes an area north of the University of Northern Colorado campus that could use a jumpstart. Ditto for most of the others.

And opportunity-zone status could be a strong incentive for keeping some major employers within an area — assuming that funds can be invested in projects to benefit those businesses.

Nationwide, concerns have been expressed that opportunity zones will accelerate gentrification of neighborhoods, forcing out some residents who could be displaced by upscale developments. Boulder is concerned that housing not be demolished to make way for other projects, as that could exacerbate the affordable-housing crisis within the city.

That concern prompted the city council to impose a moratorium on development within much of the opportunity zone until city priorities are clarified — a move opposed by local business organizations.

Opportunity zones could be a great catalyst for redevelopment of blighted areas, or for investment within businesses. As the IRS finalizes rules for the program, many uncertainties likely will be addressed.

But will opportunity zones have the desired effect of revitalizing economically depressed areas? Will they become a boondoggle for developers who could have built their projects anyway? Will they promote gentrification or offer an economic upside to local residents? Or will the program languish, achieving little, but consuming much time and energy?

Alas, none of those questions can be answered today. But the buzz continues

Christopher Wood can be reached at 303-630-1942, 970-232-3133 or cwood@bizwest.com.